IRS ignores intent by enforcing health tax on veterinarians

SPRINGFIELD – Is the Internal Revenue Service barking up the wrong tree?

When Obamacare was approved by Congress, few would have guessed that pet owners would be helping pick up part of the tab for the health care overhaul.

But earlier this month, the IRS decided that most of the equipment veterinarians use should be subject to a new tax.

“It is absolutely ludicrous that there is not a specific exemption for medical equipment that will be used for non-human or veterinary purposes,” said Peter Weber, executive director of the Illinois State Veterinary Medical Association. “This is a tax to pay for a human health care plan.”

As part of Obamacare, medical device makers will begin paying a 2.3 percent tax on their gross sales Jan. 1, 2013.

The tax is expected to raise $29 billion in government revenues through 2022.

Even though Congress limited the tax to devices “intended for humans,” it appears veterinarians – and their clients – will feel its bite.

You see, while Congress makes laws, bureaucrats make the rules for enforcing those laws. And sometimes what Congress intends and what bureaucrats do are two different things.

For example, in the health care reform bill, Congress limited the tax to devices “intended for humans.” But the IRS interpreted that to mean devices that could be used for humans – not just those that will be used by them.

Latex gloves, scalpels, syringes, catheters, suture material, stethoscopes, dental picks and just about any instrument a veterinarian uses also could have a human application.

In fact, medical equipment for people and animals often rolls off the same assembly lines. This fact left room for the IRS to nose its way in and say all equipment should be taxed the same – no matter whether it will be used for a person or an animal.

The ruling has some veterinarians squealing louder than a pig caught in a gate.

I know a little bit about this because both my dad and my wife are veterinarians.

After all, medical device makers will pass on the cost of the tax to vets. And vets will pass on the cost to their clients.

Some are perplexed by the IRS’ refusal to make a distinction on how these dual-use devices are taxed. But it shouldn’t surprise anyone. After all, government hangs onto money like a dog gripping a bone.

“There is virtually nothing I use that couldn’t have a human application,” said Harold Watters, a Galesburg veterinarian. “Government likes to talk about raising ‘revenue,’ but that’s just another word for raising ‘taxes.’ It eventually all gets passed on to everyone. Lower- and middle-class pet owners will end up paying this tax, too.”

• Scott Reeder is a veteran statehouse reporter and the journalist in residence at the Illinois Policy Institute. Readers can subscribe to his free reports from the Springfield by going to reederreport.com. He can be reached at sreeder@illinoispolicy.org.